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By the time most people have reached adulthood, they have been scolded to read all contracts before signing them, no matter how long and confusing the fine print may be. Indeed, in many cases, the documents we are asked to sign are so complicated and hard to read that common sense demands hiring a lawyer. Nonetheless, because hiring lawyers is expensive and time-consuming, and because many of us are unaware of the actual risk of something going wrong, we ignore that risk and sign -- often without even reading -- happy to have saved the time and money. Only later, when we need the lawyer’s equivalent of a root-canal, do we ruefully ask for help to clean up the mess.
Yet even if the document is simple and the person being asked to sign it has taken the time to read it, major pitfalls still lurk. For example, if something goes wrong, who is on the hook? As a general rule, a person who signs a contract is promising to fulfill the terms of the contract. 3 That means Gillian will likely be liable if the promises in the contracts she signed are not satisfied. This is especially dangerous if the agreement purports to make promises that the signer cannot keep, like a promise to keep something secret that must by law be disclosed.
A bigger problem here is "agency," or the power to act on someone else’s behalf. If the signer purports to bind another party (such as a company or institution) to perform a promise, the signer must, in truth, have authority from that party to bind it in order for the party to be bound. 4
Moreover, the authority must extend to the particular type of contract: if person A has limited authority to buy groceries for person B, A may not use B’s money to buy investment bonds. Though these rules appear simple on their face, they are less simple in practice.
People who occupy key offices in a corporation (such as President or Chief Executive Officer) or a university (such as Provost or Dean), generally have formal, written authority to bind their employers to the contracts they sign on their behalf. 5 The formal authority typically appears in charters, articles of incorporation, bylaws, or employment contracts. Other times, authority is expressly delegated in a memo or other writing, such as through a power of attorney. This express grant of power is called "actual" authority. Generally, individual employees do not have actual authority to bind their employers. In the Government, analogous to the structure of many large institutions, the statutes passed by Congress specify which offices can bind a Federal Agency, and actual authority below that level must be formally delegated in writing.
Occasionally, authority to act as an agent reasonably can be inferred from the circumstances, even if no actual authority exists. If the General Counsel, Associate Dean, or Senior Vice President of a company or university signs a contract, others might be justified in relying on the signature, even if the individual has no written delegation to display. 6 This is a narrow exception, however, and one cannot reasonably assume that any randomly selected employee of a company has authority to bind that company. Because Gillian did not have any indicia she had authority to bind her Institute 7 (such as being the Institute’s Director or Technology Development Coordinator), Neurion had a poor basis for assuming her signature alone would bind anyone at NIH other than herself, and so would have weak grounds at best for asserting that the Government breached any contracts.
This is cold comfort for Gillian. Normally, if an agent acts within the scope of the authority delegated by the principal, the agent will not be liable if the principal later breaks the contract. 8 This immunity, however, rests on whether the agent acted within the scope of the authority. Because Gillian’s signature was not authorized by NIH, she will not be protected by the fact that she signed the agreements, even if she did it in an attempt to carry out her official duties.
Finally, even if a scientist who signs an agreement clearly lacked authority to bind the employer, the employer may still be placed in the position of facing an irate company. Two recent cases highlight the problem.
According to an article recently published in The Scientist, 9 Dr. David Kern, a medical professor at Brown University, was asked by a local fabric company called Microfibers to consult on two cases involving a rare syndrome called interstitial lung disease. He discovered it was due to conditions in Microfiber’s factories, and also discovered cases in other employees of Microfibers working at two specific facilities. Immediately, he began the process of publishing his results. Microfibers, however, threatened to sue both Kern and his employer, on the basis of certain nondisclosure agreements signed by students in Kern’s department, who had come to Microfibers for a visit two years before on an unrelated matter. Apparently, neither Kern nor his employer had ever ratified the agreements, and it is unclear whether either was even aware of the agreements’ existence. Even so, Kern’s employer, placed in the highly awkward position of having to face litigation or restraining Kern, elected the latter.
Another recent example of an attempt to suppress research, reported in major newspapers, 10 occurred between the former Boots Pharmaceuticals 11 and the University of California at San Francisco. In 1987, Dr. Betty Dong, a scientist at UCSF, signed Boots’s research-funding agreement personally, in order to conduct a study on whether Synthroid (a synthetic drug for the treatment of hyperthyroidism) was superior to generic equivalents. The study was completed in 1990, which indicated that the generics were bioequivalent to Synthroid; Dr. Dong handed copies of the data to Boots. By 1995, Boots had not released any of the information, so Dr. Dong submitted a manuscript to JAMA. Boots asserted the study was flawed, and refused permission to publish -- and the original research agreement said that permission was required before the results could be made public. Despite the fact that the provision violated UCSF policy, UCSF’s attorney told Dr. Dong that UCSF would honor the term, and if she wanted to publish on her own, she would have to defend herself against Boots’s threatened litigation without UCSF support. Faced with this threat, Dr. Dong asked JAMA to halt the article. Only after intervention by Dr. Louis Sullivan, then the Secretary of the U.S. Department of Health & Human Services, did Boots relent, and allow publication, 12 but not before Boots had published a scathing critique, reinterpreting the data in a manner that cast a more favorable light on Synthroid. 13
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